iShares J.P. Morgan $ EM Invt Grd Bd ETF's holdings are exposed to average levels of ESG risk relative to those of its peers in the Emerging Markets Fixed Income category, thus earning it an average Morningstar Sustainability Rating of 3 globes. Competing funds in the category with ratings of 4 or 5 globes have less ESG risk in their holdings. Unlike impact, which measures positive environmental and societal outcomes attributable to an investment, ESG risk reflects the degree to which investments could be affected by material ESG issues, including climate change, biodiversity, product safety, community relations, data privacy and security, bribery and corruption, and corporate governance.
iShares J.P. Morgan $ EM Invt Grd Bd ETF is not classified by its manager as either an Article 8 or Article 9 fund under the Sustainable Finance Disclosure Regulation. Article 8 and Article 9 funds promote environmental or sustainable characteristics or have a sustainable investment strategy, respectively, and hence would have a higher probability to drive positive ESG outcomes. Currently, the fund has 53.1% involvement in fossil fuels, which is high in both absolute and relative terms. The fossil fuel involvement of funds in the same Global Emerging Markets Bond category averages 36.8%. Companies are considered involved in fossil fuels if they derive at least 5% of their revenue from thermal coal, oil, and gas. The fund exhibits extremely high exposure (20.34%) to companies with high or severe controversies. Companies with controversies are involved in incidents such as corruption, employee abuses, environmental incidents, and corporate scandals that pose serious business risks to the company. Severe and high controversies can have significant financial repercussions, ranging from legal penalties to consumer boycotts. Such controversies can also damage the reputation of both companies themselves and their shareholders.
iShares J.P. Morgan $ EM Invt Grd Bd ETF has a 12-month asset-weighted Carbon Risk Score of 21.1. This is situated at the lower end of the medium carbon risk band, suggesting that its portfolio holdings are not among the worst-positioned to transition to a low-carbon economy, but they are not among the best-positioned either. Investors concerned about the transition risks may prefer to consider funds with negligible or low carbon risk. Funds with a lower carbon risk classification may be more favored by investors concerned about transition risks, as such funds often tilt toward companies that operate in sectors less exposed to the transition (for example, healthcare and IT) or companies in more carbon-intensive sectors (for example, materials and utilities) that consider climate change in their business strategy, and therefore are positively aligned with the transition.